I wasn’t going to ever write about credit card arbitrage, but a couple of fellow PF bloggers have had some experiences within the last week that I felt deserved comment.

First I read Q’s post at $1 Million to My Name about how he’s finally succumbed to the lure of 0% balance transfers. Credit card arbitrage, or 0% balance transfers, are a common way some personal finance-savvy people make a little ‘free’ money. Essentially, you apply for a 0% balance transfer credit card with a large credit limit, borrow the money, then deposit it into a high-interest savings account like INGDirect, Emigrant Direct, and so on. Depending on the amount you borrow, you can make several hundred dollars a month in interest.

I’ve not done this for one main reason – hassle. I don’t want to keep track of a bunch of credit cards I’ve borrowed against. I also don’t want to have to worry about making a mistake somewhere along the way that wipes out all the work doing this. Basically, doing this would complicate my life and I don’t think it’s worth it. The other (much less important to me) reason is that doing this seriously negatively affects your FICO score.

Which brings me to the second reason I finally wrote on the topic – doing credit card arbitrage could cost you in other ways.

Sun at Sun’s Financial Diary came across a Discover card that gives a balance transfer rate of 3.99% APR until 2020. He thinks if he were to apply for the card, his application may very well be denied because he currently plays credit card arbitrage. He’s got balances of $50,000 on various cards.

Something like this might save you much more money but you can’t take advantage of it because you’re in debt for a huge amount of money playing the 0% game. Or what if you suddenly need a car loan you didn’t anticipate? My wife had that experience when she got into a car accident and the insurance company declared her car a total loss.